Wall Street might be snowed in, but stocks certainly aren't

Another snowbound—and possibly range bound—day of trading is expected Friday, as thinly staffed trading desks look ahead to the three-day President's Day weekend.

Stocks defied bears Thursday and shrugged off an ugly retail sales report, which was clearly affected by weather but also signaled softer consumption. As economists trimmed first-quarter growth forecasts to below 2 percent, stocks rebounded and the Nasdaq closed at a new 13-year high.

The Dow closed up 63 points at 16,027, and the S&P 500 was up 10 at 1,829. The Nasdaq was up 39 at 4,240, in a sixth day of gains.

Jin Lee | Bloomberg | Getty Images

"It felt like there was a lot going on in futures. We had some people unwinding large hedges," said David Lutz of Stifel Nicolaus. "I think you had a lot of European money coming back into the market. We saw the same phenomena around the debt ceiling in October—a lot of European managers had to pull money out of the United States. I think you had the reverse of that."

"I think the Fed is easing some nerves out there, and it was sparked by some of the debt ceiling angst being removed," Lutz said of the market's turnaround and gains Thursday. The Senate followed the House in approving legislation to extend the government's borrowing authority, ending a rancorous debate.

Traders noted a lot of short covering and said that was behind some of the gains in a few momentum names. Tech took the market higher, but Lutz also pointed to a surround in the retail ETF XRT on a day when economic data reflected retail weakness.

"I thought a 1.7 percent turnaround in retail was a pretty big deal today," he said. "Semis did well. Home builders were up. The miners were on fire."

Julian Emanuel, U.S. equity and derivatives strategist at UBS, said the retail turnaround was a big deal.

"You could really say that was one of the catalysts today," he said. "These things have been trading awfully since Jan. 1. I'm not wild about them, but it's one of the reasons the shorts got stuffed today."

Emanuel expects the market to pause a bit because of the quick run off the lows last week and then take aim at new highs. His year-end target for the S&P 500 is 1,950.

Traders were also watching the technical action in the S&P 500, which tested a band just below 1,810.

"It came down, tested the 50-day, bounced hard off it, and it feels like the bulls are in complete contro," said Scott Redler, who trades short-term technicals at T3Live.com. "The bears had a chance to bring the market in, but they dropped the ball today. They had bad data. You had a short-term pause. The futures were down 10, and there was no selling pressure."

He had been looking for the market to drop to 1,795 to 1,805 before moving higher.

"There's a chance in the next week or two that the S&P has a chance at making a stab at 2014 highs," Redler said.

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Emanuel said the market could pause in a sideways trade over the next week. He pointed to historically weak performance for stocks on the Tuesday after President's Day, when the S&P has been down seven of the last 11 years. He also said that seasonally February is often negative.

"It doesn't necessarily need to be down, but it needs a breather which would be healthy," he said. "If you look at the underperformance of consumer discretionary year to date ... most of that is in the price. We're now in the third month of crummy weather. At some point, we hope if it becomes a third month of crummy data that it doesn't become a psychological anchoring point for investors. We want to see the data turn around.

"Theoretically, we're still in a trading range of 1,740 to 1,850, until proven otherwise," he added.